Daniel Silke | Can the ANC rise to its 'new normal'?

Daniel Silke
Daniel Silke
  • The supplementary budget formalised the Covid-19 rescue package.
  • The news was concerning - a a contraction of 7.2%, a budget deficit of close to 16% and a debt-to-GDP ratio of 82% for this year alone.
  • The 'new normal' for the ANC is that it will become a party of trade-offs where old habits are no longer tolerable. 

In the end, Finance Minister Tito Mboweni largely delivered a technocratic-style supplementary budget this last week.

The event formalised the rescue package and served to underline the country's deep economic plight in confirming dismal debt and growth figures. It did not provide any policy direction nor much comfort.

With this in mind, one could perhaps summarise the 30-minute speech in a tweet of less than 240 characters:

"We're in deep trouble. We've run out of our money. We still don't have a plan. Give us more time. Prepare for the worst. Pray."

When you stare down a contraction of 7.2%, a budget deficit of close to 16% and a debt-to-GDP ratio of 82% for this year alone, you require urgent action.

When you factor in a R40 billion tax hole alongside accepting massive new loans, you require even more drastic action. Yet, there still seems no cohesive strategy to address these shortfalls.

The only more 'holistic' – and potentially sustainable - solution came from references to a 'zero-based' approach yet to be implemented.

The inference is that this 'active' approach would allocate funds based on program efficiency. Included in this is the preference to start from scratch eliminating older – and perhaps wasteful line items and committing only to new programs in which a full cost/benefit analysis can be achieved.  Anything deemed contrary to this would see substantial reductions in monetary allocations.

Leaky ship

The key issue here - in the context of the stark warning of a debt default if hard decisions on spending were not made – is that the ANC (via Minister Mboweni) now faces a moment of budgetary and political reckoning to stabilise an increasingly leaky ship.

At the heart of any revision of the budgetary process will be a clash between the 'wish list' of a big-spending quasi-socialist political party like the ANC and the current reality of a state staring down a type of liquidation aka debt default. 

Although Minister Mboweni has constantly warned his own party of the deteriorating economic position through consecutive Budgets, this was the Supplemental Budget contained the direst warning to date.

So, the choices for the ANC are slowly – but surely – being laid out. And for a party that has built its own power platform on rising levels of patronage via a rising public sector wage bill combined with cadre-friendly contracts and consumption-related handouts, it's going to be a particularly bitter pill to swallow.

Minister Mboweni might not want to use the dreaded 'austerity' word but ultimately, this is what he is suggesting. And, as a result, this could be politically combustible within the already volatile governing Alliance.

In Mboweni's efforts to restore some credibility to the nation's balance sheet, a fundamental political shift within the ANC will have to take place.

There is little room now for a maverick Finance Minister with some factional or limited pragmatic supporters being able to carry the day. Mr Mboweni needs support from his own Cabinet to accomplish this otherwise his efforts might well be stymied.

The magnitude of the economic deterioration really requires solutions supported by the broader ANC and in conjunction with both civil society on the social services front and the business community providing both investments and expertise.

The ANC needs to reach well beyond its own inner circles and delegate real authority to these parties to assist with a review of both spending priorities and recovery projects. To what degree a governing political party so suspicious of anything beyond its boundaries (and even within its own belly) can overcome these constraints remains to be seen.

But the 'active' approach to reducing our debt burden requires the ANC to dig even deeper. It requires the party to be honest with itself, its supporters and with South Africa.

Its wings of dispensing largesse have been clipped due to two viruses – the scourge of corruption and mismanagement of the last decade and the last six months of Covid-19.

The party now has to accept its limitations. It no longer can be a dispenser of jobs nor an unregulated business broker for its cadres. It's time to ditch the deep flaws (and destructive habits) within the governing party for a new, more targeted and business-friendly approach in which its social agenda can still be pursued but from the perspective of a smaller state following the important dictates of accountability.

That's the theory. The practice is a political party embedded in an often-unrealistic view of endless cash to spend and endless taxpayers to milk. The ANC conflates itself with the State, and has justified its job creation excesses, state salary increases and jobs-for-pals opportunities. If the party is to take Minister Mboweni's warning seriously, it will have to dilute these desires. They are no longer sustainable or simply affordable. Simple as that.

Whilst the Supplementary Budget provided scant policy detail, the covert messaging was clear. The ANC now have to make choices on how to spend and prioritise its more limited resources.

The 'new normal' for the ANC is that it will become a party of trade-offs where the old habits are no longer tolerable. The extent of this deficit and the rapid accumulation of debt will add to the political pressures and the contestation of personality will align with the contestation between forging a new, more efficient way or reverting back to the bad habits of old.

The ANC ultimately needs a review of its own philosophy and how to match that with what it now can potentially afford. The party actually needs a dose of 'zero-based' budgeting to its own economic policies as it attempts to remain in power beyond 2024.

Unless the ANC rallies behind its Finance Minister and then takes its revisions to its electorate in an open and honest way, there may be trouble ahead – politically for the party and economically for the country. The party can't afford to maintain its power on dependency and patronage for ever and a day. And that's precisely what Covid-19 has exacerbated and will lay bare in the months to come.

Daniel Silke is the director of the Political Futures Consultancy in Cape Town. Twitter (@DanielSilke) and at www.danielsilkeglobal.com. Views expressed are his own.

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